Big Business Everything ElseWritten by Dennis Hollier On 05 December 2011
The Great Atlantic & Pacific Tea Company

Sometimes, when I see a brand new car drive past, I like to think to myself: a few months ago, every constituent of that car was in the ground. It was iron ore in Wisconsin, or petroleum in Kuwait, or bauxite in Chile, or lead in China. Out of these diverse raw ingredients, thousands of individual auto parts were created and then assembled into the fabulous machine rolling past me. In other words, not so long ago, that car was dirt.

I think of this every time I begin to take human inventiveness for granted. Much of what we think of as “the world”, after all, is man-made. That includes not simply the obvious artifacts of civilization — the buildings and machines and infrastructure — but also the cultural and social apparatus that animates society. Someone invented it all.

Some things, though, seem so basic, so inevitable, that it’s hard to imagine they needed inventing at all. There are famous examples: the decimal system, zero, the wheel, brakes, etc. These, too, were the creations of clever people trying to solve problems or improve their lot. This concept was brought home to me recently as I read Avis Anderson’s fascinating book “A&P: The Story of the Great Atlantic & Pacific Tea Company.”

For nearly a century, A&P was the largest retailer in the world. By the turn of the 19th Century, the company had thousands of small grocery stores and wagon routes scattered across the country. At their peak, they were bigger than the next five retailers combined, companies that included Sears & Roebuck, J.C. Penney, Woolworth and Kroger’s. Well into the 1950s, they dominated the industry in a way eerily reminiscent of Walmart today. And like Walmart, it was the subject of wild vituperation. In fact, much of the criticism of A&P sounds like a verbatim transcript of the criticism now applied to Walmart: They’re destroying mom and pop stores. They’re squeezing the middle men out of business. They’re tearing the fabric of American culture. Etc. Perhaps it was (and is) true. But A&P, like Walmart today, also brought lower prices to the masses. Along the way, they completely changed how we shop.

A&P, it turns out, invented much of what we now consider the modern retail industry. Here are a few examples:

  • Discount stores;
  • loss leaders;
  • coupons;
  • trading stamps (OK, that’s a little 1960s);
  • store brands;
  • supermarkets;
  • self-service; and
  • vertically integrated transportation and warehousing.

Imagine your grocery store without any of those. And that’s just the details. The broader picture is how all these innovations created a massive retail conglomerate that dominated the nation’s food supply from field production to the paper bag you carried home with your groceries. This dominance lead to decades of anti-trust cases and struggles with Congress and many state legislatures that hoped to turn back the clock. In the end though, progress is ineluctable. A&P eventually faltered, but the system they created continues to dominate how most of us get our groceries. That’s because of the greatest A&P invention of all: Instead of trying to sell goods at the highest price possible, they wanted to sell at the lowest price they could afford.

That’s a business model that still seems new in the era of Google.

 

 

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